(Adds liquidity coverage ratios, more quotes from speech;
foreign banks likely to be affected)
By Saeed Azhar and Anshuman Daga
SINGAPORE, June 24 Singapore is to bring in new
rules to ensure all banks operating in the city-state have
enough liquid assets to withstand a sudden shock to the
financial system, falling in line with the global regulatory
trend for tougher liquidity rules.
DBS, Oversea-Chinese Banking Group and
United Overseas Bank, and foreign banks with a major
local presence will have to meet a requirement proposed by the
Basel Committee on Banking known as the liquidity coverage ratio
(LCR) by 2015, Lim Hng Kiang, Singapore's trade and industry
minister, said in a speech on Tuesday.
Regulators proposed the LCR in the wake of the 2008
financial crisis to ensure banks have a big enough buffer of top
quality assets such as cash and government bonds so they can
withstand 30 days of outflows at a time when it is tough to get
funding on the wholesale markets.
Under the rules formulated by Singapore, the three local
banks will have to meet the full LCR requirement for
Singapore-dollar assets by January 2015 and an all-currency LCR
of 60 percent. They will then have to meet the all-currency LCR
in full by 2019, meaning they will need to have enough assets to
withstand a sudden outflow of deposits and other liabilities,
regardless of the currency.
Foreign banks will have to meet a Singapore dollar LCR of
100 percent and an all-currency LCR of 50 percent. These rules
for foreign banks will apply from January 2016.
Lim did not specify which assets will be regarded as "high
quality", an issue that has been of concern, as assets regarded
as liquid in western markets, such as domestic government bonds,
are scarce in Singapore due to a low level of public debt.
DBS Group CEO Piyush Gupta told Reuters that initially the
central bank was proposing a separate liquidity requirement for
the U.S. dollar alone, which they have done away with due to
opposition from the banking industry.
The industry is comfortable with the new rules because now
it covers all currencies and it is easy to meet the liquidity
requirements, he said.
"The crisis experience shows how the buildup of risks can
severely destabilise even the most developed and sophisticated
financial markets," Lim, who is also the deputy chairman of the
Monetary Authority of Singapore (MAS), told a banking event.
"Securing the safety and robustness of our banking sector
must be an ongoing process," he added.
Lim also said the central bank will come up with a new
framework of rules for local and foreign banks with a large
retail presence in Singapore, to ensure the domestic banking
system is protected in the event they run into difficulties.
This will include ensuring they have a well-developed
recovery and resolution plan, so they have a clear blueprint of
what to do in the event they were to become distressed.
MAS proposes to regard a bank as having a significant retail
presence if its market share of resident non-bank deposits is 3
percent or more, and if it has 150,000 or more depositors with
accounts under S$250,000 ($200,000).
This suggests these rules will apply not only to Singapore's
three main banks, but also to international lenders such as
Citigroup, Standard Chartered and Malaysia's
($1 = 1.2503 Singapore Dollars)
(Additional reporting by Rachel Armstrong; editing by Louise